Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 21.17, 1619-1621 [2024-00284]
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Federal Register / Vol. 89, No. 7 / Wednesday, January 10, 2024 / Notices
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–MEMX–2023–39 and should be
submitted on or before January 31, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.50
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–00286 Filed 1–9–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99273; File No. SR–
CboeEDGX–2023–082]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Rule
21.17
lotter on DSK11XQN23PROD with NOTICES1
January 4, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
21, 2023, Cboe EDGX Exchange, Inc.
(the ‘‘Exchange’’ or ‘‘EDGX’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Exchange filed the proposal as a
‘‘non-controversial’’ proposed rule
change pursuant to Section
19(b)(3)(A)(iii) of the Act 3 and Rule
19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) proposes to
amend Rule 21.17. The text of the
proposed rule change is provided
below.
(additions are italicized; deletions are
[bracketed])
*
*
*
*
*
Rules of Cboe EDGX Exchange, Inc.
*
*
*
*
*
Rule 21.17. Additional Price Protection
Mechanisms and Risk Controls
The System’s acceptance and
execution of orders, quotes, and bulk
messages, as applicable, are subject to
the price protection mechanisms and
risk controls in Rule 21.16, this Rule
21.17, and as otherwise set forth in the
Rules. Unless otherwise specified the
price protections set forth in this Rule,
including the numeric values
established by the Exchange, may not be
disabled or adjusted. The Exchange may
share any of a User’s risk settings with
the Clearing Member that clears
transactions on behalf of the User.
(a) Simple Orders.
(1)–(3) No change.
(4) Drill-Through Price Protection.
(A)–(B) No change.
(C) The System enters a market order
with a Time-in Force of Day or limit
order with a Time-in-Force of Day, GTC,
or GTD (or unexecuted portion) not
executed pursuant to subparagraph (A)
in the EDGX Options Book with a
displayed price equal to the DrillThrough Price, unless the terms of the
order instruct otherwise.
(i)–(vii) No change.
([viii]D) This protection does not
apply to bulk messages or ISOs.
*
*
*
*
*
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
50 17
1 15
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3 15
U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
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1619
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 21.17. Specifically, the Exchange
proposes to exclude Intermarket Sweep
Orders (‘‘ISOs’’) from its drill-through
protection. Pursuant to Rule
21.17(a)(4)(A), if a buy (sell) order enters
the book at the conclusion of the
opening auction process or would
execute or post to the book when it
enters the book, the Exchange’s system
executes the order up to an Exchangedetermined buffer amount (determined
on a class and premium basis) above
(below) the offer (bid) limit of the
Opening Collar 5 or the National Best
Offer (‘‘NBO’’) (National Best Bid
(‘‘NBB’’)) that existed at the time of
order entry, respectively (the ‘‘drillthrough price’’). The System cancels or
rejects any market order with a time-inforce of immediate-or-cancel (‘‘IOC’’) (or
unexecuted portion or limit order with
time-in-force of IOC or fill-or-kill
(‘‘FOK’’) (or unexecuted portion not
executed pursuant to the previous
sentence.6 Rule 21.17(a)(4)(C)
establishes an iterative drill-through
process, whereby the Exchange permits
orders to rest in the book for multiple
time periods and at more aggressive
displayed prices during each time
period. Specifically, for a market order
with a time-in-force of day or limit order
with a time-in-force of day, good-tilcancelled (‘‘GTC’’), or good-til-gate
(‘‘GTD’’) (or unexecuted portion), the
Exchange system enters the order in the
book with a displayed price equal to the
drill-through price (unless the terms of
the order instruct otherwise). The order
(or unexecuted portion) will rest in the
book at the drill-through price for the
5 See Rule 21.7(a) for the definition of Opening
Collars.
6 See Rule 21.17(a)(4)(B).
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Federal Register / Vol. 89, No. 7 / Wednesday, January 10, 2024 / Notices
lotter on DSK11XQN23PROD with NOTICES1
duration of consecutive time periods
(the Exchange determines on a class-byclass basis the length of the time period
in milliseconds, which may not exceed
three seconds), which are referred to as
‘‘iterations.’’ Following the end of each
period, the Exchange system adds (if a
buy order) or subtracts (if a sell order)
one buffer amount (the Exchange
determines the buffer amount on a classby-class basis) to the drill-through price
displayed during the immediately
preceding period (each new price
becomes the ‘‘drill-through price’’). The
order (or unexecuted portion) rests in
the book at that new drill-through price
for the duration of the subsequent
period. The Exchange system applies a
timestamp to the order (or unexecuted
portion) based on the time it enters or
is re-priced in the book for priority
reasons. The order continues through
this iterative process until the earliest of
the following to occur: (a) the order
fully executes; (b) the user cancels the
order; and (c) the buy (sell) order’s limit
price equals or is less (greater) than the
drill-through price at any time during
application of the drill-through
mechanism, in which case the order
rests in the book at its limit price,
subject to a user’s instructions.
Currently, the drill-through protection
applies to ISOs. An ISO is a limit order
for an options series that meets the
following requirements: (1) when routed
to an Eligible Exchange,7 the order is
identified as an ISO; and (2)
simultaneously with the routing of the
order, one or more additional ISOs, as
necessary, are routed to execute against
the full displayed size of any Protected
Bid, in the case of a limit order to sell,
or any Protected Offer, in the case of a
limit order to buy, for the options series
7 An ‘‘Eligible Exchange’’ means a national
securities exchange registered with the SEC in
accordance with Section 6(a) of the Securities
Exchange Act of 1934 (the ‘‘Act’’) that: (a) is a
Participant Exchange in OCC (as that term is
defined in Section VII of the OCC by-laws); (b) is
a party to the OPRA Plan (as that term is described
in Section I of the OPRA Plan); and (c) if the
national securities exchange chooses not to become
a party to this Plan, is a participant in another plan
approved by the Securities and Exchange
Commission (the ‘‘Commission’’) providing for
comparable Trade-Through and Locked and
Crossed Market protection. The term ‘‘TradeThrough’’ means a transaction in an options series
at a price that is lower than a Protected Bid or
higher than a Protected Offer. A ‘‘Protected Bid’’ or
‘‘Protected Offer’’ means a bid or offer in an options
series, respectively, that (a) is disseminated
pursuant to the OPRA Plan; and (b) is the best bid
or best offer, respectively, displayed by an Eligible
Exchange. A ‘‘Locked Market’’ means a quoted
market in which a Protected Bid is equal to a
Protected Offer in a series of an options class, and
a ‘‘Crossed Market’’ means a quoted market in
which a Protected bid is higher than a Protected
Offer in a series of an options class. See Rule
27.1(a)(5), (7), (10), (18), and (22).
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16:40 Jan 09, 2024
Jkt 262001
with a price that is superior to the limit
price of the ISO, with such additional
orders also marked as ISOs.8
The Exchange proposes to exclude
ISOs from the drill-through protection.9
The primary purpose of the drillthrough price protection is to prevent
orders from executing at prices ‘‘too far
away’’ from the market when they enter
the book for potential execution. This is
inconsistent with the primary purpose
of ISOs, which is to permit orders to
trade at prices outside of the market.
The Exchange believes excluding ISOs
from the drill-through is consistent with
the purpose of each type of
functionality.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.10 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 11 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 12 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
the proposed rule change will promote
just and equitable principles of trade,
remove impediments to and perfect the
mechanism of a national market system,
and protect investors and the public
8 See
Rules 21.1(d)(9) and 27.1(a)(9).
proposed Rule 21.17(a)(4)(D). As set forth in
current Rule 21.17(a)(4)(C)(viii), the drill-through
protection does not apply to bulk messages. The
proposed rule change moves this current exclusion
to proposed Rule 21.17(a)(4)(D) so that all orders
and quotes that are excluded from the drill-through
protection are maintained in the same rule
provision, and the Exchange believes proposed
subparagraph (D) is a more appropriate place for
listing excluded orders and quotes. This
nonsubstantive change regarding the exclusion of
bulk messages from the drill-through protection has
no impact on current behavior and merely moves
the exclusion to a different subparagraph.
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(5).
12 Id.
9 See
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interest, because it will increase
instances in which ISOs receive
executions up to their limit prices,
including outside of the market prices
when the ISOs were submitted to the
Exchange, which the Exchange believes
is consistent with the expectations of
users that submit those orders. As noted
above, the primary purpose of ISOs is to
permit orders to trade at prices outside
of the market. The primary purpose of
the drill-through price protection is to
prevent orders from executing at prices
‘‘too far away’’ from the market when
they enter the book for potential
execution. The Exchange believes
excluding ISOs from the drill-through is
consistent with the purpose of each type
of functionality. Therefore, the
Exchange believes the proposed rule
change will enhance the Exchange
system by aligning its drill-through
protection with the intended purpose of
ISOs.13 The Exchange believes the
proposed rule change may ultimately
result in additional executions
consistent with the expectations of users
that submit ISOs, which ultimately
benefits investors. The Exchange further
believes the proposed rule change is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers, as it will
apply to ISOs of all users.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule change will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act,
because it will apply in the same
manner to ISOs of all Members. The
Exchange does not believe that the
proposed rule change will impose any
burden on intermarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act,
because it relates solely to the
application of one of the Exchange’s
price protection mechanisms to ISOs.
The Exchange notes at least one other
options exchange excludes ISOs from
certain of its price protection
measures.14
13 The Exchange notes ISOs will continue to
receive price protection, such as from the limit
order fat finger check. See Rule 21.17(a)(2).
14 See Miami International Securities Exchange,
LLC (‘‘MIAX’’) Rule 515(c)(1) (ISOs excluded from
MIAX’s price protection on non-market maker
orders in non-proprietary products, which prevents
orders from executing more than a specified
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Federal Register / Vol. 89, No. 7 / Wednesday, January 10, 2024 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 15 and Rule
19b–4(f)(2) 16 thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–CboeEDGX–2023–082 and should be
submitted on or before January 31, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–00284 Filed 1–9–24; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeEDGX–2023–082 on the subject
line.
lotter on DSK11XQN23PROD with NOTICES1
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CboeEDGX–2023–082. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
number of increments away from the national best
bid or offer (‘‘NBBO’’) at the time the order is
received).
15 15 U.S.C. 78s(b)(3)(A)(ii).
16 17 CFR 240.19b–4(f)(2).
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DEPARTMENT OF STATE
[Public Notice: 12297]
Report to Congress Pursuant to the
United States—Northern Triangle
Enhanced Engagement Act
ACTION:
Notice of report.
This document provides an
update to the Department of State’s
report to Congress on July 19, 2023,
regarding foreign persons who are
determined to have knowingly engaged
in actions that undermine democratic
processes or institutions, significant
corruption, or obstruction of
investigation into such acts of
corruption in El Salvador, Guatemala,
and Honduras pursuant to the United
States—Northern Triangle Enhanced
Engagement Act, as amended.
SUPPLEMENTARY INFORMATION: Report to
Congress on Foreign Persons who have
Knowingly Engaged in Actions that
Undermine Democratic Processes or
Institutions, or in Significant
SUMMARY:
17 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00113
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1621
Corruption, or in Obstruction of
Investigations into Such Acts of
Corruption, in El Salvador, Guatemala,
Honduras, and Nicaragua Pursuant to
Section 353(b) of the Department of
State, Foreign Operations, and Related
Programs Appropriations Act, 2021
(Div. FF, Pub. L. 116–260, as
amended) (Section 353)
Consistent with section 353(b) of the
United States—Northern Triangle
Enhanced Engagement Act (Div. FF,
Pub. L. 116–260) (the Act), as amended,
this report is being submitted to the
House Foreign Affairs Committee,
Senate Foreign Relations Committee,
House Committee on the Judiciary, and
the Senate Committee on the Judiciary.
This document provides an update to
the Department of State’s report to
Congress on July 19, 2023. Section
353(b) requires the submission of a
report that identifies the following
persons in El Salvador, Guatemala,
Honduras, and Nicaragua: foreign
persons who the President has
determined have knowingly engaged (1)
in actions that undermine democratic
processes or institutions; (2) in
significant corruption; and (3) in
obstruction of investigations into such
acts of corruption, including the
following: corruption related to
government contracts; bribery and
extortion; the facilitation or transfer of
the proceeds of corruption, including
through money laundering; and acts of
violence, harassment, or intimidation
directed at governmental and
nongovernmental corruption
investigators. On November 10, 2021,
the President signed the Reinforcing
Nicaragua’s Adherence to Conditions for
Electoral Reform (RENACER) Act,
adding Nicaragua to the countries
within the scope of Section 353. On
June 21, 2021, the President delegated
his authority under section 353 to the
Secretary of State.
Under section 353, foreign persons
identified in the report submitted to
Congress are generally ineligible for
visas and admission to the United States
and any current visa shall be revoked
and any other valid visa or entry
documentation cancelled. Consistent
with section 353(g), this report will be
published in the Federal Register.
This report includes individuals who
the Secretary has determined have
engaged in the relevant activity based
upon credible information. The
Department will continue to review the
individuals listed in the report and
consider all available tools to deter and
disrupt corrupt and undemocratic
activity in El Salvador, Guatemala,
Honduras, and Nicaragua. The
Department also continues to actively
E:\FR\FM\10JAN1.SGM
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]]>Agencies
[Federal Register Volume 89, Number 7 (Wednesday, January 10, 2024)]
[Notices]
[Pages 1619-1621]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00284]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99273; File No. SR-CboeEDGX-2023-082]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Rule 21.17
January 4, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 21, 2023, Cboe EDGX Exchange, Inc. (the ``Exchange''
or ``EDGX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Exchange filed the proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to
amend Rule 21.17. The text of the proposed rule change is provided
below.
(additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe EDGX Exchange, Inc.
* * * * *
Rule 21.17. Additional Price Protection Mechanisms and Risk Controls
The System's acceptance and execution of orders, quotes, and bulk
messages, as applicable, are subject to the price protection mechanisms
and risk controls in Rule 21.16, this Rule 21.17, and as otherwise set
forth in the Rules. Unless otherwise specified the price protections
set forth in this Rule, including the numeric values established by the
Exchange, may not be disabled or adjusted. The Exchange may share any
of a User's risk settings with the Clearing Member that clears
transactions on behalf of the User.
(a) Simple Orders.
(1)-(3) No change.
(4) Drill-Through Price Protection.
(A)-(B) No change.
(C) The System enters a market order with a Time-in Force of Day or
limit order with a Time-in-Force of Day, GTC, or GTD (or unexecuted
portion) not executed pursuant to subparagraph (A) in the EDGX Options
Book with a displayed price equal to the Drill-Through Price, unless
the terms of the order instruct otherwise.
(i)-(vii) No change.
([viii]D) This protection does not apply to bulk messages or ISOs.
* * * * *
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 21.17. Specifically, the
Exchange proposes to exclude Intermarket Sweep Orders (``ISOs'') from
its drill-through protection. Pursuant to Rule 21.17(a)(4)(A), if a buy
(sell) order enters the book at the conclusion of the opening auction
process or would execute or post to the book when it enters the book,
the Exchange's system executes the order up to an Exchange-determined
buffer amount (determined on a class and premium basis) above (below)
the offer (bid) limit of the Opening Collar \5\ or the National Best
Offer (``NBO'') (National Best Bid (``NBB'')) that existed at the time
of order entry, respectively (the ``drill-through price''). The System
cancels or rejects any market order with a time-in-force of immediate-
or-cancel (``IOC'') (or unexecuted portion or limit order with time-in-
force of IOC or fill-or-kill (``FOK'') (or unexecuted portion not
executed pursuant to the previous sentence.\6\ Rule 21.17(a)(4)(C)
establishes an iterative drill-through process, whereby the Exchange
permits orders to rest in the book for multiple time periods and at
more aggressive displayed prices during each time period. Specifically,
for a market order with a time-in-force of day or limit order with a
time-in-force of day, good-til-cancelled (``GTC''), or good-til-gate
(``GTD'') (or unexecuted portion), the Exchange system enters the order
in the book with a displayed price equal to the drill-through price
(unless the terms of the order instruct otherwise). The order (or
unexecuted portion) will rest in the book at the drill-through price
for the
[[Page 1620]]
duration of consecutive time periods (the Exchange determines on a
class-by-class basis the length of the time period in milliseconds,
which may not exceed three seconds), which are referred to as
``iterations.'' Following the end of each period, the Exchange system
adds (if a buy order) or subtracts (if a sell order) one buffer amount
(the Exchange determines the buffer amount on a class-by-class basis)
to the drill-through price displayed during the immediately preceding
period (each new price becomes the ``drill-through price''). The order
(or unexecuted portion) rests in the book at that new drill-through
price for the duration of the subsequent period. The Exchange system
applies a timestamp to the order (or unexecuted portion) based on the
time it enters or is re-priced in the book for priority reasons. The
order continues through this iterative process until the earliest of
the following to occur: (a) the order fully executes; (b) the user
cancels the order; and (c) the buy (sell) order's limit price equals or
is less (greater) than the drill-through price at any time during
application of the drill-through mechanism, in which case the order
rests in the book at its limit price, subject to a user's instructions.
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\5\ See Rule 21.7(a) for the definition of Opening Collars.
\6\ See Rule 21.17(a)(4)(B).
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Currently, the drill-through protection applies to ISOs. An ISO is
a limit order for an options series that meets the following
requirements: (1) when routed to an Eligible Exchange,\7\ the order is
identified as an ISO; and (2) simultaneously with the routing of the
order, one or more additional ISOs, as necessary, are routed to execute
against the full displayed size of any Protected Bid, in the case of a
limit order to sell, or any Protected Offer, in the case of a limit
order to buy, for the options series with a price that is superior to
the limit price of the ISO, with such additional orders also marked as
ISOs.\8\
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\7\ An ``Eligible Exchange'' means a national securities
exchange registered with the SEC in accordance with Section 6(a) of
the Securities Exchange Act of 1934 (the ``Act'') that: (a) is a
Participant Exchange in OCC (as that term is defined in Section VII
of the OCC by-laws); (b) is a party to the OPRA Plan (as that term
is described in Section I of the OPRA Plan); and (c) if the national
securities exchange chooses not to become a party to this Plan, is a
participant in another plan approved by the Securities and Exchange
Commission (the ``Commission'') providing for comparable Trade-
Through and Locked and Crossed Market protection. The term ``Trade-
Through'' means a transaction in an options series at a price that
is lower than a Protected Bid or higher than a Protected Offer. A
``Protected Bid'' or ``Protected Offer'' means a bid or offer in an
options series, respectively, that (a) is disseminated pursuant to
the OPRA Plan; and (b) is the best bid or best offer, respectively,
displayed by an Eligible Exchange. A ``Locked Market'' means a
quoted market in which a Protected Bid is equal to a Protected Offer
in a series of an options class, and a ``Crossed Market'' means a
quoted market in which a Protected bid is higher than a Protected
Offer in a series of an options class. See Rule 27.1(a)(5), (7),
(10), (18), and (22).
\8\ See Rules 21.1(d)(9) and 27.1(a)(9).
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The Exchange proposes to exclude ISOs from the drill-through
protection.\9\ The primary purpose of the drill-through price
protection is to prevent orders from executing at prices ``too far
away'' from the market when they enter the book for potential
execution. This is inconsistent with the primary purpose of ISOs, which
is to permit orders to trade at prices outside of the market. The
Exchange believes excluding ISOs from the drill-through is consistent
with the purpose of each type of functionality.
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\9\ See proposed Rule 21.17(a)(4)(D). As set forth in current
Rule 21.17(a)(4)(C)(viii), the drill-through protection does not
apply to bulk messages. The proposed rule change moves this current
exclusion to proposed Rule 21.17(a)(4)(D) so that all orders and
quotes that are excluded from the drill-through protection are
maintained in the same rule provision, and the Exchange believes
proposed subparagraph (D) is a more appropriate place for listing
excluded orders and quotes. This nonsubstantive change regarding the
exclusion of bulk messages from the drill-through protection has no
impact on current behavior and merely moves the exclusion to a
different subparagraph.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\10\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \11\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \12\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
\12\ Id.
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In particular, the Exchange believes the proposed rule change will
promote just and equitable principles of trade, remove impediments to
and perfect the mechanism of a national market system, and protect
investors and the public interest, because it will increase instances
in which ISOs receive executions up to their limit prices, including
outside of the market prices when the ISOs were submitted to the
Exchange, which the Exchange believes is consistent with the
expectations of users that submit those orders. As noted above, the
primary purpose of ISOs is to permit orders to trade at prices outside
of the market. The primary purpose of the drill-through price
protection is to prevent orders from executing at prices ``too far
away'' from the market when they enter the book for potential
execution. The Exchange believes excluding ISOs from the drill-through
is consistent with the purpose of each type of functionality.
Therefore, the Exchange believes the proposed rule change will enhance
the Exchange system by aligning its drill-through protection with the
intended purpose of ISOs.\13\ The Exchange believes the proposed rule
change may ultimately result in additional executions consistent with
the expectations of users that submit ISOs, which ultimately benefits
investors. The Exchange further believes the proposed rule change is
not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers, as it will apply to ISOs of all users.
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\13\ The Exchange notes ISOs will continue to receive price
protection, such as from the limit order fat finger check. See Rule
21.17(a)(2).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act, because it will apply in the
same manner to ISOs of all Members. The Exchange does not believe that
the proposed rule change will impose any burden on intermarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act, because it relates solely to the application of
one of the Exchange's price protection mechanisms to ISOs. The Exchange
notes at least one other options exchange excludes ISOs from certain of
its price protection measures.\14\
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\14\ See Miami International Securities Exchange, LLC (``MIAX'')
Rule 515(c)(1) (ISOs excluded from MIAX's price protection on non-
market maker orders in non-proprietary products, which prevents
orders from executing more than a specified number of increments
away from the national best bid or offer (``NBBO'') at the time the
order is received).
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[[Page 1621]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \15\ and Rule 19b-4(f)(2) \16\ thereunder.
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\15\ 15 U.S.C. 78s(b)(3)(A)(ii).
\16\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeEDGX-2023-082 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeEDGX-2023-082. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-CboeEDGX-2023-082 and should
be submitted on or before January 31, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00284 Filed 1-9-24; 8:45 am]
BILLING CODE 8011-01-P
